Money Insider: Cheaper alternatives to debit and credit cards while travelling abroad

With the skiing season in full swing, it's a good time to highlight the wide range of costs when using plastic abroad.

Debit and credit cards may offer a secure and convenient way to pay, but the fees and charges vary greatly and they are often an expensive way to pay outside the UK. So it's worth finding a cheaper alternative before you travel.

Pre-paid currency cards from Centtrip, Ukash, FairFX and myTravelCash are among the most competitive, according to my recent research, and the cost savings make it worth carrying a specialist travel card with your passport whenever you venture overseas.

Most banks add on a foreign usage fee to all credit card cash and purchase transactions. It's normally around 2.75 per cent to 2.99 per cent. But that's only half the story, as on top of the usage fee, most credit card cash withdrawals will already cost you an extra 3 per cent, so an ATM withdrawal of £100 in the local currency can easily set you back a combined charge of about £6.

We tend to take our debit cards for granted, particularly because they don't cost anything to use while in the UK. Unfortunately it's not the same when you're overseas and this is something that holidaymakers sometimes overlook – until the charges are debited from their account.

As with credit cards, there is a usage fee for cash withdrawals (2.75 per cent to 2.99 per cent) plus an ATM withdrawal charge, typically between £1.50 and £5.

However, the charges that catch most people out are those levied for debit card purchases: the usage fee, plus up to £1.50 per transaction, regardless of the amount.

The worst offenders are Halifax (£1.50 per purchase transaction), Santander (£1.25), Lloyds Bank and TSB (both £1). If you're looking for a fee-free debit card to use overseas, you'll need to open a current account with Norwich & Peterborough Building Society or Metro Bank.

It's worth spending a couple of minutes to check with your bank what the charges are for your particular plastic before you set off, rather than getting a nasty shock when you return. At least if you understand the overseas charges, you can adapt your spending pattern accordingly. For example, you don't want to be making cash withdrawals or purchases of £10 or £20 if you're going to be hit with charges of £1.50-plus each time.

Consider a scenario where you spend £1,500 currency equivalent, including three £200 ATM withdrawals and nine purchase transactions. With a pre-paid currency card from Centtrip this would cost you just £12.30, while using a debit card from Santander or Lloyds Bank would cost you about five times that at £61.50 and £62.85, respectively.

Pre-paid currency cards are secured by chip and PIN, accepted wherever you see the MasterCard symbol and offer a far cheaper way to pay than most debit and credit cards.

Currency cards can be loaded from your debit card and as such the exchange rate is locked in at the time the cash is transferred to the card, so you'll know exactly what you'll be paying for all your holiday transactions.

A final warning: whatever type of plastic you use overseas beware of an increasingly common custom (particularly in Europe) where the foreign retailer or ATM gives you the option to pay in pounds, known as Dynamic Currency Conversion (DCC). Although you know exactly how much you'll be debited, the downside is that you can pay way over the odds on the exchange rate – the golden rule is never pay in pounds overseas.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk